FAR

Question 1

What is the primary objective of accounting?

Answer 1

To measure income

Question 2

What is the most authoritative set of accounting pronouncements?

Answer 2

The FASB Codification

Question 3

What are the 2 Levels of Authority within the FASB codification?

Answer 3

Authoritative and Non-Authoritative

Question 4

How does managerial accounting differ from financial accounting

Answer 4

Managerial Accounting has a timliness focus

Question 5

Which financial reports are required to be filed with the SEC

Answer 5

Form 10K - Annual and Audited

Question 6

What is the focus of financial reports for individual companies?

Answer 6

Focus is on the needs of users to help them make decisions and assessments about the company

Question 7

What are the Primary Constraints of Financial Reporting?

Answer 7

Cost vs. Benefit

Question 8

What are the Secondary Constraints of Financial Reporting?

Answer 8

Consistency - Year vs. Year

Question 9

What are the Qualitative Characteristics of Financial Reporting?

Answer 9

Relevance & Faithful Representation

Question 10

What are the Enhancing Qualitative Characteristics of Financial Reporting?

Answer 10

Comparability
Verifiability
Timeliness
Understandability

Question 11

How does Conservatism affect the recording of accounting transactions

Answer 11

When an estimate is necessary to to uncertainty conservatism chooses the best option that won’t overstate the financial position of the company

Question 12

What is an accrual?

Answer 12

Earned (Revenue) or Incurred (Expense) but no Cash Receipt/Outlay yet

Question 13

What is a deferral?

Answer 13

Cash Receipt/Outlay but not Earned (Revenue) or Incurred (Expense)

Question 14

What is recognition in accounting?

Answer 14

When an item is recorded and included in the financial statements.

Question 15

Describe fair value with respect to an asset

Answer 15

The price you would receive if you sold the asset

Question 16

What market assumptions are made in a fair value assessment?

Answer 16

Buyer and Seller are not Related

Question 17

What items are included in a Level 1 input in the fair value hierarchy?

Answer 17

Price quotes or market prices

Question 18

What items are included in a Level 2 valuation input?

Answer 18

Interest rates

Question 19

What items are included in Level 3 inputs of the fair value hierarchy?

Answer 19

Unobservable inputs such as assumptions or forecasts

Question 20

What are acceptable valuation techniques for fair value?

Answer 20

Market approach - uses market transactions and prices to value the asset

Question 21

What are current assets?

Answer 21

Cash

Question 22

What are current liabilities?

Answer 22

Liabilities that will use current assets during the present operating cycle.

Question 23

What is an accrued liability?

Answer 23

Expense that has been incurred but not paid

Question 24

What is a deferred revenue?

Answer 24

A type of current liability

Question 25

When are revenues recognized?

Answer 25

When they have been earned; i.e. company has performed

Question 26

What is a gain?

Answer 26

Increase in equity from an activity or event that is not central to the main activities of the business

Question 27

What is a loss?

Answer 27

Decrease in equity from an activity or event that is not central to the main activities of the business

Question 28

What is an operating cycle?

Answer 28

Average time it takes to turn materials or services into Cash

Question 29

What is the present value of future cash flows?

Answer 29

Valuation method - the current value of a future amount of money using a specific interest rate

Question 30

What is historical cost?

Answer 30

How much an asset cost - (net of depreciation and amortization)

Question 31

What is replacement cost?

Answer 31

How much it would cost to reacquire an asset today (Entrance Cost)

Question 32

What is a market cost?

Answer 32

The sale price of an asset (Exit Cost)

Question 33

What is Net Realizable Value?

Answer 33

Sale Price of an Asset - Selling/Disposal Fee

Question 34

When is royalty income recognized? How is it recognized?

Answer 34

Recognized when earned

Question 35

When is revenue recognized in an installment sale?

Answer 35

Revenue recognized upon receipt of cash

Question 36

What is deferred gross profit?

Answer 36

Gross profit that can't be recognized until cash is received

Question 37

What is the cost recovery method?

Answer 37

No revenue recognized until all costs are recovered from purchase of the asset

Question 38

WHat is subscription revenue? How is it recorded?

Answer 38

Payment has been received but performance is not complete

Question 39

How are franchise revenues recorded?

Answer 39

Franchisor - Startup franchise fee revenue deferred until substancial performance

Question 40

How do you calculate sales revenue starting from cash basis income?

Answer 40

Mnemonic: SPEAR-BAR

Question 41

How do you calculate COGS starting from Cash Basis?

Answer 41

Mnemonic: CRAP-I

Question 42

How are discontinued operations reported? When are they used?

Answer 42

Reported Net of Tax after Continuing Operations but before Extra Ordinary Items......IDEA

Question 43

What qualifies as an extraordinary item? How is it recorded?

Answer 43

Both unusual AND infrequent

Question 44

What is contant dollar accounting?

Answer 44

Adjusts assets to reflect a consistent level of purchasing power due to inflation

Question 45

When are expenses recognized?

Answer 45

When they are incurred. Accure if not yet paid.

Question 46

What are accrued expenses?

Answer 46

Those incurred but not paid

Question 47

When should impaired assets be written down to fair value and expensed?

Answer 47

Immediately

Question 48

What are business start-up costs?

Answer 48

One-time costs for opeing a new business

Question 49

When is interest "not" expensed?

Answer 49

Interest on projects (software) for internal use is not expensed but is instead capitalized

Question 50

What major items should be classified under General & Administrative (G&A) expenses?

Answer 50

Office staff salaries

Question 51

What are the major components of Comprehensive Income?

Answer 51

Net Income + Other Comprehensive Income (OCI)

Question 52

What items are considered cumulative accounting adjustments?

Answer 52

Foreign Currency Translation Adjustments

Question 53

What is the purpose of a reclassification adjustment?

Answer 53

Avoids double counting items that were included in both Net Income and OCI

Question 54

Where is Comprehensive Income Reported?

Answer 54

Reported in a Single or Combined Income Statement

Question 55

What disclosures on accounting policies are required in financial statements?

Answer 55

Accounting principles used

Question 56

What are some major risks and uncertainties that must be disclosed?

Answer 56

Nature of operations